Tasmanian Farmers and Graziers Association
Submission on:
Energy Strategy Issues Paper
September, 2014
AGRICULTURE IN TASMANIA
The total Tasmania gross state product (GSP) was $23.9 billion for the 2012 year. The GVP of
agriculture, forestry and fishing collectively amounted to almost 9% of this total – before input
supply services and value-adding, which is well above that for the nation as a whole.
In 2010/11, the farm gate value of production (GVP) of agriculture, forestry and fishing was
$1.98 billion. This comprised:
 agriculture - $1.150 billion;
 forestry - $235million; and
 fishing - $597 million.
This is before considering input supply services and value-adding. Taking into account basic
multiplier factors, this means the farm-dependent economy contributes more than $5.0
billion to the gross state economy - in spite of adverse pressures on the forestry industry.
Over the past 25 years, the average annual rate of increase in farm gate GVP has been close
to 4%. Average growth in the farm GVP over the recent past has been slightly slower than
average, as a result of reduced export returns due to the high value of the $A and increasing
cost pressures along the value chain.
Milk and milk products followed by livestock and livestock products were the main sector
contributors to farm production value. However, this was partly offset by reduced vegetables
output associated with severe wet weather at harvest in the first quarter of 2011.
Some 10,500 people were employed directly in agriculture forestry and fishing. A further
8,500 people were employed in services to agriculture and food and fibre value-adding. This
is close to 9% of the working population in Tasmania.
The preliminary Tasmanian government Scorecard data for 2010-11 (prepared by DPIPWE)
indicates the wholesale value of food and beverage production has remained steady, roughly
in line with the previous year at $2.7billion This demonstrates the important role that the
processing sector plays in adding value to farm gate returns and the fortunes of those who
live and work in the farm dependent sector.
Furthermore, the inclusion of forestry as a long cycle crop enterprise in farming businesses in
the state means that the overall economic contribution must include these figures too. Our
best estimate is that in 2009/10 this added a further $400 million to farm gate income.
Clearly, as a result of the uncertainty currently evident in this sector, that figure has fallen
significantly since then. Nonetheless, on a long term outlook, forestry remains an integral part
of a diversified farm business.
Compared to the previous year, growth in agriculture GVP has broadly offset the fall in
forestry GVP.
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The vast bulk of our agricultural product is sold interstate and overseas. Farm exports in
2010/11 easily exceeded $550m (farm gate equivalent value) when account is taken of
pharmaceutical products. The share of exports to Asian destination exceeded 50%. In
addition, it is estimated that a further $1.8 billion of raw and value-added product was
shipped to the mainland.
In 2011/2012, total exports from Tasmania were valued at $3.196 billion. Agricultural
products represented some 30% of that total – approximately $1 billion. Almost 25% of total
exports ($502 million) were destined for ASEAN countries. Agricultural products valued at
approximately $121 million represented 25% of that total. ASEAN countries have become
increasingly important destinations too, with overall exports increasing marginally over the
past three years; and food exports alone increasing significantly from $71 million to $96
million over the period 2009/2010 through 2011/2012. Major products exported to ASEAN
countries included dairy ($42 million); seafood ($32 million) and wood products ($20 million
estimated from private forestry sector). Key destinations included Japan (35%), China (21%),
and Hong Kong (21%).
Farmers are also significant land managers in the state, with almost a third of Tasmania’s land
area of 68,300 sq. km committed to agriculture.
These figures clearly confirm the importance of the sector as an economic driver for the
state’s economy – and also demonstrate that agriculture is a more significant contributor to
the Tasmanian economy than in any other state. With this in mind, it is clear that Tasmania
needs to ensure that the agricultural base of the state remains competitive and profitable.
ABOUT THE TFGA
The TFGA is the leading representative body for Tasmanian primary producers. TFGA
members are responsible for generating approximately 80% of the value created by the
Tasmanian agricultural sector.
Operationally, the TFGA is divided into separate councils that deal with each of the major
commodity areas. As well, we have a number of standing committees that deal with crosscommodity issues such as climate change, biosecurity, forestry, water and weeds. This
structure ensures that we are constantly in contact with farmers and other related service
providers across the state. As a result, we are well aware of the outlook, expectations and
practical needs of our industry.
With our purpose being to promote the sustainable development of Tasmanian primary
industries, the TFGA is committed to ensuring that the agriculture sector in Tasmania is
profitable and sustainable. We are also committed to promoting the vital contribution the
agricultural sector makes to the environmental, social and economic fabric of the Tasmanian
community.
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GENERAL COMMENT
The TFGA welcomes the opportunity to provide a submission to the Tasmanian Government’s
issues paper on developing an energy strategy for Tasmania.
The Government is to be commended on acknowledging the need to develop an energy
strategy for Tasmania and the consultation process it is undertaking. The work done by the
Energy Working Group to date has allowed us to develop a start point for what is a very large
and problematic issue. While some of the reforms over the past few years have been positive
some have been costly mistakes that could have been avoided with full and considered
consultation.
TFGA acknowledges the difficulty of developing an energy strategy for Tasmania that will
deliver an efficient and reliable energy resource for Tasmanians at prices that do not stifle
business viability. There are a number of factors that make this particularly challenging for
Tasmania: we are a small market; our generation and distribution sectors are government
owned monopolies; and any strategy must factor in the potential impacts of climate change
both from an environmental and shifting policy perspective – both globally and nationally.
Given the aforementioned limitations, TFGA questions the ability of government to deliver
affordable energy at a retail level without making some tough choices that deliver
competition in the wholesale generation and distribution services as well. Whilst retail
competition is important it is not the Holy Grail and cannot be expected to deliver downward
price pressure on its own.
It is also important when we discuss affordable energy that we do not exclude the costs to
business for connection installation and maintenance. These costs can be a huge imposition
and deter further investment by existing and new businesses.
TFGA does not profess to be an expert on energy generation and nor does it have all the
answers and solutions to Tasmania’s energy issues but as TFGA is confronted with the energy
issues of its members on a far too regular basis we are well placed to deliver a perspective of
small to medium businesses who are often disproportionately large energy consumers.
As the energy issues paper has been developed with a focus on electricity based energy TFGA
has in its responses to the questions posed has focussed its response on electricity based
energy.
QUESTIONS POSED BY THE ENERGY STRATEGIES ISSUES PAPER
Question 1
What enhancements could be made to regulatory frameworks to ensure the right incentives for
businesses and consumers are in place?
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Tasmania has signed up to the national energy market and as a part of that they have also
taken on the extremely high level of regulation and reporting imposed by that regime. The
Tasmanian energy landscape, as it currently stands, appears to have adopted all of the added
regulatory burden of the national framework but received no benefits from being a part of
the framework.
Whatever framework is adopted for Tasmania it should reflect the true needs of doing
business in Tasmania and reflect the Tasmanian energy market.
Question 2
Given both the State and Commonwealth Government are committed to reducing red and green
tape, and that the electricity market is highly regulated and complex, what opportunities are
there to reduce or remove regulation?
TFGA has not sought to examine the complex regulations around the energy market but has
chosen to focus on the regulation that it sees that impacts its members on a daily basis.
TFGA deals with a myriad of small regulatory issues that cost time and money to its members.
Some of these are tied to the national regulatory framework that has been adopted by
Tasmania and some flow from local regulation or even internal policy decisions by the three
state owned electricity businesses.
The government should look at those easy targets that are in their control as a matter of
expediency and then work towards a review of those under the national regulatory system
that add no real value to the individual Tasmanian market.
The TFGA is happy to provide more detail but for the sake of brevity will highlight some of the
issues that it is aware of that through policy and regulation have imposed a burden of
monetary and time costs to the industry over the past twelve months:
 Requirement of an “all-weather” road to all meters – even when in the middle of a
paddock.
 Estimation of meters during winter months as meter readers are not allowed to drive
to meters that they deem unsafe due to we conditions or meter placement. Meters
that were approved upon installation by Aurora or its predecessor. Invariably the
estimated winter accounts are in the thousands of dollars at a time when there has
been no actual usage of the installation and at a time when there is no income flowing
to the farm to meet the additional cost.
 Producers electing to self-read meters in order to avoid estimation have to have an
email address for every meter that they wish to self-read – this could be up to ten
meters for some farm businesses.
 Requirement of an engineer’s certificate for existing meter platforms before a meter
reader is allowed to read the meter.
 Distribution tower replacement program not taking into account the needs of the land
owners that these structures traverse.
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Irrigation meter installation inadvertently transferred into farm tenant’s name.
Multiple accounts for the one business.
Those are just a snap shot of issues that should be easily resolved and yet are simply not.
When developing regulation we have to start assessing whether the protection that we seek
to afford through the implementation of the regulation is out-weighed by the cost to the enduser; if the answer is yes then the regulation should not exist.
Question 3
Is retail competition important because of price, choice or for other reasons?
Retail competition is important because of price and service however, as previously stated,
as a stand-alone mechanism it is limited in its ability to deliver much relief for high electricity
costs.
There is no doubt that in order to deliver price discounts some retailers may elect to make
savings in the customer service area. A consumer would then be given the option of choosing
between modest price savings at the expense of more prompt and efficient servicing of their
account.
Without additional reforms around generation and networks their will remain little room for
variance by multiple retailers. If Tasmania’s SOEB’s are able to deliver electricity prices that
are demonstrably the cheapest in Australia and comparative on an international basis then
choice becomes less important; at the end of the day it little matters who sends your account
if there is little variance in the price charged.
Question 4
What enhancements or additional information could increase the reporting transparency of the
Government's electricity businesses and contribute to improved efficiency?
Currently State Owned Energy Businesses (SOEBs) are burdened with a heavy level of
reporting and compliance with Australian Energy Regulator under the national framework. It
needs to be assessed as to whether that national reporting is adding value to transparency
and efficiency of our SOEBs at a state level or whether it is just feeding into the general
national melting pot. It must be recognised that the Tasmanian energy market is a much
different animal than most other states; all of our generation and distribution businesses are
government owned monopolies and therefore much easier to impose regulation upon and,
arguably, have a much greater responsibility to the customers that they serve. TFGA questions
whether the current regime is serving Tasmanians adequately.
While there are is more than adequate information on spot pricing through the National
Energy Market this is a mechanism understood by few outside of the energy industry. There
needs to be a much more transparent and easily comparable reporting of the end-user cost
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that highlights in plain English the comparable tariff costs between states (and even
internationally).
TFGA believes that the Tasmanian Economic Regulator (TER) should have its scope and
resources broadened to allow it to request the information it needs to ensure that it is able
to investigate more fully any area that it believes is needed to ensure the SGOEBs are
delivering the best possible efficiencies.
Question 5
Do energy intensive and trade exposed businesses require greater future price certainty to maintain
and/or grow their operations?
The requirement of future price certainty for Tasmania’s large industrial users is also
obviously important in encouraging their ongoing investment within the state.
However future price certainty is always an enhancement to the business planning of any
enterprise looking at further investment. The agricultural sector is in the throes of a massive
investment in irrigation in this state.
When those primary producers involved with the early irrigation schemes initially prepared
their business case when making the decision as to whether or not they should invest in the
new irrigation schemes and any consequential on-farm expansion it was in a far different
energy market than they face today; the return on investment today would be much less than
they would have predicted based on energy costs of five years ago.
Question 6
Would you consider accepting slightly lower levels of reliability if this resulted in materially lower
prices?
For the agricultural industry reliability is integral to many businesses; in particular for dairy, irrigation
reliant cropping and businesses reliant on cool storage. Over the years we have seen what it costs
the industry when outages, both of short and long duration, impact the ability of these businesses
to operate.
For farms under irrigation an outage of even seconds can mean hours of work repriming and setting
irrigation pumps during season. Degradation of soft fruit, particularly berries and cherries, that is
not kept at optimum temperature can equate to vast losses at the destined export markets – both
in terms of lost dollars and lost reputation.
The impacts for the dairy industry where transmission loss can range from animal health issues
caused by delayed milking through to the loss of a full day’s production costing an average dairy
business tens of thousands of dollars.
There are also impacts for general livestock businesses as they need to rely on constant electricity
flow to maintain water supply to troughs and electric fencing.
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Strangely enough, despite the critical nature of reliability of supply for the agricultural sector
the compensation available for a rural business under the supply guarantee is far less
generous than that available to their urban counterparts.
Question 7
Would a review of tariff structures be desirable, in terms of minimizing total network costs?
It is difficult to see how the restructuring of tariffs can offer in the way of minimizing network
costs. Any changes to tariffs would amount to window dressing or a shifting of the cost burden
between sectors.
While time based variations in tariffs may be a reasonable option for private consumers they
are limited in influencing the consumption behaviour of businesses. Often business has little
influence over their energy demand times and can be counter-productive where there is no
ability to adjust timing of demand.
The time-of-use irrigation tariff has seen some farmers shift their irrigation to night-time
watering to capture the lower rate however there are often enterprises who due to water
availability are forced to water at peak rates causing hardship to their business.
Question 8
What approach, including non-regulatory ones, should Government consider for improving the
thermal efficiency of our buildings?
The Government should look to implementing an education program on the potential cost
efficiencies of improved thermal efficiency and options on how to achieve this. Delivering thermal
efficiencies in buildings in Tasmania where energy use for heating in winter months is very high could
help deliver significant savings to businesses.
The implementation of thermal efficiencies can be a particularly challenging and costly exercise for
any small to medium businesses who have limited resources and little understanding of the how to
achieve best outcomes for their meagre resources. This is particularly so for those many businesses
occupying the multitude of heritage buildings where there can be the complication of dealing with
the limitations of heritage listings.
TFGA would like to see the government adopt a program that encourages building assessments to
be made by suitably qualified persons/businesses. The cost of this could be refunded by government
through a subsidy where the thermal efficiencies made under the building assessments are adopted
in full. Upon presentation of a suitable business case low interest loans could be made available
through the government to enable the requisite investment by business.
Question 9
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What approach to energy efficiency should Government use to help improve productivity for small to
medium businesses, and to reduce energy bills for households?
A similar approach to achieving energy efficiencies for businesses that TFGA has suggested at
question 8 could be adopted by the government. While there have been some case studies
achievec4ed and there are numerous fact sheets available every business is different and
gleaning what will work best for an individual business from the multitude of material available
can be a challenging and time-consuming for many small businesses.
While educative material is important it is still not a stand-alone measure; it has to be supported
by access to resources, particularly in the initial stages. Therefore TFGA urges the government
to make available the information on potential cost v investment efficiencies and support that
with low interest loans to implement the necessary measures.
TFGA would like to note that consumers achieving energy savings through reduced usage will
obviously mean reduced revenue for Tasmania’s SOEBs. It is of little use for energy customers
to reduce usage if the sum result is for the SOEBs to increase charges to make up the shortfall
in their margins. There has to be a tandem recognition of this issue and a strategy put in place
to ensure that energy customers do not end up worse off because they invest in energy
efficiency measures only to be ‘rewarded’ by increased consumption charges that neutralise
their savings equating to net overall loss.
Question 10
What roleshould Government playin attemptingto retain and increaseload growthin Tasmania and
how should it do it?
Tasmania has to question whether or not they actually need to increase their load growth.
There is already questions being asked around whether Australia has an excess energy
generation. Tasmania is also facing uncertainty around the future presence in the state of two
of our largest electricity consumers.
Before we even look to the discussion of increased load growth we have to develop ensure
that there will be a customer base for our current generation. How will we deal with the
excess energy available if any of our major consumers withdraw from the state? Possibly this
question has already been addressed by the government and its SOEB’s and if so any planned
strategy to deal with this issue should be made available to the public.
Government should be focussing on ensuring that it encourages an economic environment
that is conducive to retaining existing businesses and encouraging of new investment and
allow the market to dictate load growth demand naturally.
Question 11
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What further potential is there to develop renewable energy in Tasmania, including wind energy,
given there is no unmet Tasmanian demand requiring additional generation for the foreseeable
future?
TFGA believes that further government investment in renewable energy in Tasmania without
a corresponding demand is poor business. With no current unmet demand, uncertainty
around future demand and the constant striving for reduced energy consumption it is difficult
to see where the impetus to further develop renewable energy in Tasmania.
The investment to date in other energy sources outside of Hydro has sensible diversified our
options and will help in times of drought to ensure continuity of a clean energy source.
However further investment, sans any market failure, should be left to the commercial sector
who will invest if there is a market demand.
Tasmania was ahead of its time and invested in renewable energy 100 years ago and we must
ask ourselves whether our constant obsession with further development of renewable energy
is sensible or necessary. We have done our heavy lifting and unless we have a clear and longterm commercial case for exporting to meet mainland demand we should not push further
investment in growing energy generation.
Question 12
Is there a further facilitation role for Government in gas roll-out, or should Government focus its
efforts on examining the costs and benefits of improving minimum protections for gas customers?
Any further gas roll out should be left to the province of the commercial sector. As was rightly
recognised in the discussion paper Tasmania, as a price taker for gas, cannot influence or
control the market. The rapidly rising cost of gas and with current projections predicting that
this trend is set to continue it is unlikely that gas will continue to be the attractive investment
proposition that it has been in the past.
Further investment should be in those assets that can provide income within the state and
allow commercial entities to invest in gas based on market demand.
Question 13
What are considered to be the key opportunities, and the key issues, associated with possible energy
futures?
As previously stated Tasmania has done the heavy lifting when it comes to renewable energy and should be
well placed to reap the benefits of that early investment in relation to the ongoing climate change strategies
however it is disappointing that we do not appear to be receiving full value and recognition of that foresight;
particularly under the RET scheme.
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Tasmania could look to evaluate its individual contribution to climate change, with regard to its reliance on
renewable energy and high forestation, as compared to other states and nations and use that as a marketing
tool to attract further investment and in the development of new markets for its produce.
It would be sensible for Tasmania to look to invest in other non-electricity based renewable energy
types especially those with potential to export such as bio-fuels. Given that the commercial sector is
already investing in this field in Tasmania the government could limit its role to that of facilitator;
working closely with those active in the space to see what it can do to enhance ongoing investment.
As has been already recognised there is no unmet market demand in Tasmania and we have
decreased energy (electricity) consumption down, and continue to do so, through market
mechanisms and improved energy efficiencies. This unmet demand can create an opportunity for
government to explore options to replace other environmentally unfriendly fuel types with clean
electricity. However to encourage this we would have to reverse the trend of high electricity
consumption costs to ensure that investment in alternatives are economically attractive.
Question 14
What could be some outcomes for the Tasmanian Energy Strategy, and what actions can
government, or energy providers and consumers, take to achieve them? How could
success/performance be measured?
Tasmania’s energy strategy should aim to:
 Maximise our energy market by ensuring that we deliver reliable and efficient
electricity at an internationally competitive prices;
 Develop a risk model that seeks to diversify the load demand and market, ensuring
Tasmania is not vulnerable to the withdrawal of individual large industrial consumers;
 Encourage further investment by commercial entities in a diverse array of clean
energy sources;
 Mandate that SOEBs invest in technology to help them to optimise demand
management as opposed to further investment in new generation and to maximise
network efficiency.
 Develop an energy environment that makes Tasmania attractive for business
investment by:
o Ensuring SOEBs are proactive in removing red tape rather than developing
policies that deliver a burden to business that is greater than the issue the
policy seeks to remedy.
o Competitive capital cost pricing structure that encourages investment in new
businesses. Start-up businesses should not be dissuaded from investment due
to exorbitant costs of getting electricity to their new business.
 Ensure a variety of mechanisms are available to enable businesses and individuals to
adopt energy efficiency measures and make better consumer choices; and
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Explore ways to introduce competition in both the generation and distribution
markets or re-evaluate the way Tasmania develops its pricing across the whole of the
energy market with a view to reducing end retail costs.
Explore new technologies that would allow greater control by energy consumers over
their use. For example roll out of smart metering and supportive technology that
allows monitoring of power consumption.
Extend the scope and resources of the TER to enable them to ensure true transparency
in pricing structures of SOEBs
CONCLUSION
Any energy strategy adopted must recognise what we have already achieved historically in
electricity generation and seek to maximise our existing investments. We need to seek new
ways to capitalise on this whether it be through improved technologies, new markets or new
uses.
Whatever the strategy adopted it has to be clear, it has to be achievable and it has to be done
through meaningful consolation. The appointment of the Energy Taskforce and the
development of the issues paper is a step in the right direction. However as there are many
facets to our energy industry government should not rely on the Taskforce as the sole
mechanism for advice. Government also needs to ensure that it does not ‘cherry-pick’ from
the advice it receives those parts that suit its purpose. The recent attempts to sell Aurora
customer base shows us how easy and costly it can be to get it wrong.
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